Shane Trigg is General Manager, Real Estate for AppFolio, Inc.
The soaring demand for housing throughout 2022 has created an equally strong push toward the rental markets. Even as inflation reached its highest point in 40 years, the demand boost continues. This boost isn’t all positive for property managers, however, as inflationary impacts are showing up in related areas, such as rising maintenance and wage costs, low inventory due to a strong renewal market, supply chain backups and sky-high material costs.
The 2022 Property Management Industry Pulse survey from my company, which was in partnership with the National Apartment Association and polled more than 1,000 employees of U.S. property management companies, outlines the challenges rental operators now face amid a potentially recession-bound economy. Here, I outline these salient challenges and offer tips on how to “inflation-proof” your real estate business and emerge in a position of strength.
Keep revenue growth top of mind.
Our survey respondents agreed that external economic pressures are now putting a premium on operational efficiency and revenue generation throughout 2022. These challenges were the two most commonly cited at 62% and 54%, respectively. For those citing revenue-related challenges, their No. 1 concern was “navigating rising inflation pressures.” Further, where our respondents said that operational deficiencies are holding them back, a top three reason for it was “rising material costs,” which have surged as much as 40% in just a matter of months.
Because my company provides property management technology solutions, I’ve seen that technology can often help act as a deflationary influence on rental businesses, as it can enable more efficient operations and for services to scale faster than costs. This means rental operators can focus more on profit margins and, ultimately, grow their portfolios. The need for increased efficiency also stems from the surge in demand for housing during the pandemic. While tech adoption during this time was initially driven by the need to maintain a safe distance, the efficiency benefits a company can gain by operating remotely are the reason why I believe online workflows will persist.
For property managers considering leveraging technology during this time, it’s important to determine the best “tech fit.” Operators can ask employees where the most busy work lies, about their biggest pain points and where manual data entry still persists. In other words, define the challenges your team is facing to determine whether and what kind of technology might help.
Monitor maintenance costs.
The rapid rise in inflation and resulting financial demands on property management businesses means every renovation or unit repair becomes exponentially more expensive, with materials even harder to acquire and vendors more difficult to source.
As such, it’s important to monitor ongoing maintenance costs. Additionally, compare costs among vendors, identify units with costly recurring maintenance needs and negotiate bulk pricing and preferred rates for repairs. These are a few best practices that can help property managers keep units in great condition while mitigating excessive spending.
Don’t forget about your residents.
While higher costs might be leaving property managers scratching their heads on how best to preserve the bottom line, rental operators can use this inflationary environment as a reason to look at resident-facing services and uncover ways to maintain or improve their experience at lower costs.
In any market cycle, stellar experiences are a differentiator and could inspire renters to renew their leases or refer friends, thus quickly filling vacancies. Real estate will forever be a people-first industry, and as residents’ demands intensify, operators simply cannot lose sight of the human element because of temporary market shifts.
To further improve the resident experience, property managers can poll for practical amenity requests; improve staff accessibility; and develop better move-in resources, including a full guide with information on parking, security, access, utilities, local recommendations, building contacts and issue resolution.
Keep headcount costs in check.
In addition to residents, headcount costs also remain top of mind. In fact, one in four respondents to my company’s survey cited human resources, staffing and recruitment as their top challenges.
Both hiring and retention have remained top concerns for quite some time, too. In fact, the industry has experienced an annual turnover rate of 32.7%, according to the National Apartment Association. This is costly. Turnover rates within onsite maintenance (39.2%), onsite leasing (31.9%) and onsite management (22.5%) have all climbed since 2010.
Now, amid soaring inflation, slowing employee turnover can help keep headcount costs at bay. Retaining employees is far more economical than constant recruitment, as salaries also inflate to account for higher cost-of-living expenses. Those factors mean property management businesses must focus on what differentiates their company as a place to work so they can attract and keep talent. Part of that effort includes ensuring a quality employee experience.
Efficient technology can help eliminate the need for staff to handle manual tasks that can overshadow more meaningful work. Additionally, managers can invest in employee career growth and mentorship, as well as make clearer efforts to advocate for staff, which can help avoid burnout.
Improved workflows should be here to stay.
Despite market shifts like the one we are now witnessing, the expectation for on-demand service is here to stay, so don’t scrap those virtual tours. Establishing more seamless transactions with residents will leave them more inclined to renew or recommend the property.
Customer satisfaction is one sure way to stand apart from the competition in any cycle—high-cost or otherwise. Embracing the best practices shared above can help property managers deliver exceptional experiences during this time and gain a competitive edge. With superfluous costs in check, today’s rental operators are free to focus on efficient revenue growth and emerge in a position of strength for years to come.